D7 You are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride in your "No Haggle" sales policy.Last year, your dealership earned record profits of $1.7 million. In your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized Honda automobiles is -1.8. In each of the last five years, your dealership has sold moremidsized automobiles than any other Honda dealership in the nation. This entitled your dealership to an additional 25 percent off themanufacturer's suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is$11,000.What price should you charge for a midsized automobile if you expect to maintain your record sales?Instructions: Enter your response rounded to two decimal places.$ 15750

In this question, we have to compute the record of sales.

Answered: suggested retail price (MSRP) in each

Business

Accounting

suggested retail price (MSRP) in each

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 35P

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Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.
JW Office Supplies, Inc., is a wholesale distributor of office supplies. It sells pencils and pens, paper goods (including computer paper and forms), staplers, calendars, and other items, excluding furniture and other major items such as copy machines that you would expect to find in an office. Sales have been growing at 5 percent per year during the past several years. Mr. Kay, the president of JW Office Supplies, recently attended a national office supplies convention. In conversations during that convention, he discovered that sales for ABC Office Supplies competitors have been growing at 15 percent per year. Arriving back home, he did a quick investigation and discovered the following: JW Office Supplies customer turnover is significantly higher than the industry average. JW Office Supplies vendor turnover is significantly lower than the industry average. The new market analysis system was supposed to be ready two years ago but has been delayed for more than one year in systems development. A staff position, reporting to the president, for a person to prepare and analyze cash budgets was created two years ago but has never been filled. Mr. Kay has called on you to conduct a systems survey of this situation. You are to assume that a request for systems development has been prepared and approved. The information system at JW Office Supplies is much like that depicted in Chapters 10 through 16. Make and describe all assumptions that you believe are necessary to solve any of the following: a. What are the specific tasks of this systems survey? b. Indicate specific quantifiable benefits and costs that should be examined in assessing the economic feasibility of any solutions that might be proposed. Explain how you would go about quantifying each benefit or cost. c. Propose and explain three different scopes for the systems analysis. Use a context diagram to describe each scope alternative. Hint: What subsystems might be involved in an analysis?
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Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week, and would earn $1 S per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs for Garrison?
Gateway Construction Company, run by Jack Gateway, employs 25 to 30 people as subcontractors for laying gas, water, and sewage pipelines. Most of Gateway’s work comes from contractswith city and state agencies in Nebraska. The company’s sales volume averages $3 million, andprofits vary between 0 and 10% of sales.Sales and profits have been somewhat below average for the past 3 years due to a recessionand intense competition. Because of this competition, Jack constantly reviews the prices thatother companies bid for jobs. When a bid is lost, he analyzes the reasons for the differencesbetween his bid and that of his competitors and uses this information to increase the competitiveness of future bids.Jack believes that Gateway’s current accounting system is deficient. Currently, all expensesare simply deducted from revenues to arrive at operating income. No effort is made to distinguish among the costs of laying pipe, obtaining contracts, and administering the company. Yetall bids are…
Floating Homes, Inc., is a manufacturer of luxury pontoon and houseboats that sell for $40,000 to $100,000. To estimate its revenues for the following year, Floating Homes divides its boat sales into three categories based on selling price (high, medium, and low) and estimates the number of units it expects to sell under three different economic scenarios. These scenarios include a recession (Scenario I), a continuation of current conditions in which the economy is level or unchanged (Scenario II), and a strong economy (Scenario III). These estimates are as follows: Scenario 1 Recession Scenario 2 Level economy Scenario 3 Strong economy Probability 25% 50% 25% High priced boats Unit sales 50 400 1,000 Average price per unit $90,000 $90,000 $90,000 Medium-Priced Boats Unit sales 100 800 3,000 Average price per unit $70,000 $70,000 $70,000 Low-priced boats…
Harrison Jones is a marketer of facial care products. It plans on introducing a new product line next year and is not quite certain whether its sales team can accomplish the sales objectives. It must determine how much dollar business it must do to at least break even. Its historical average annual sales has been $10,000,000 and its cost of sales has been $4,500,000. Its planned investment in the new business is $450,000. How much dollar business must Harrison Jones do in order to recoup its planned investment?
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